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"Government is not the solution…it is the problem" -Ronald Reagan

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Pentagon Rules Leave Military Families Vulnerable to Predatory Lenders

Posted by Stephen on June 18, 2007

The Virginia Partnership to Encourage Responsible Lending (VaPERL) joined the Consumer Federation of America, Center for Responsible Lending and the National Consumer Law Center in urging the Department of Defense to protect military families as Congress intended.

“Consumer advocates strongly urged the Department of Defense Monday to make significant changes to proposed federal regulations to ensure that predatory lenders can no longer strip earnings from U.S. soldiers and their families. As written, the regulations will leave loopholes large enough for payday, auto title and other predatory lenders to glide through, letting them gouge military borrowers without regard for a pending 36 percent interest rate cap, said the groups in a written response to the Pentagon’s request for public comments.”  Go to http://www.consumer MLA_Press_ Release_6- 12-07_Final. pdf for the full press release and a link to the full comments.

Recent actions by Virginia Attorney General Robert McDonnell reveal how predatory lenders will try to use loopholes to evade state laws.

Attorney General McDonnell recently announced a settlement with Loan Max, a predatory car title lender doing business in Virginia.  That Settlement Agreement revealed that not only is Loan Max charging borrowers 360% interest for loans that have traditionally been capped at 36%, but they were also charging a whopping 25% cash advance fee on top of that. If you borrowed $1,000, you owed $1,250 the next day!  Apparently lawsuits, media attention and the intervention of the Attorney General’s office have stopped Loan Max from charging the cash advance fee.

However, Loan Max will continue charging Virginia borrowers 360% interest and repossessing their cars if they miss a payment.  How do they do this?  The car title lenders exploited a loophole in Va. Code §6.1-330.78 passed by the General Assembly to “deregulate” the open-end credit industry.  The car title lenders call their loans “motor vehicle equity lines of credit” and claim this law now applies to them. Thanks to the loopholes in the Department of Defense regulations, the car title lenders can continue to provide 360% interest loans to the military also.

Even after the Attorney General forced Loan Max to pay over $291,000 for violating Virginia law with their cash advance fees, Loan Max continues to charge its borrowers 360% interest and has now increased its “membership fees” to $75.  VaPERL recently learned of a borrower that was forced to pay a $75 membership fee for a $150 loan.

It is time for the Department of Defense and the Virginia legislature to stop these evasions and deceptions.  All fees charged to borrowers should be considered interest and that interest should be capped at 36%.

For more information contact Jay Speer at 804-782-9430.

Jay Speer is an attorney with the Virginia Poverty Law Center

Opinions expressed by guest writers do not necessarily reflect those of management of Conservative Viewpoints.


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